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Newsom vetoes ‘premature’ crypto oversight bill for California

Gavin Newsom, governor of California, spoke during the United Nations Climate Action: Race to Zero and Resilience Forum in New York, US, on Wednesday, Sept. 21, 2022.Michael Nagle/Bloomberg

California Governor Gavin Newsom vetoed a bill that would require crypto financial-service businesses to get a special license to operate, calling it premature and costly.

Newsom on Friday declined to sign the legislation known as the Digital Financial Assets Law, which was passed by the state assembly and senate last month. While the governor said he shares the bill’s intent to protect Californians from financial harm and provide clear rules for the industry, his administration has been conducting research and gathering input on the right approach.

“It is premature to lock a licensing structure in statute without considering both this work and forthcoming federal actions,” Newsom said in a statement. “A more flexible approach is needed to ensure regulatory oversight can keep up with rapidly evolving technology and use cases, and is tailored with the proper tools to address trends and mitigate consumer harm.”

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The bill would require a loan of “tens of millions of dollars” from the general fund during the first several years, a “significant” commitment that needs to be accounted for in the state’s annual budget process, Newsom added.

The bill had been opposed by some industry advocates including the Blockchain Association, a crypto lobbying group, which said last month the proposed legislation “creates shortsighted and unhelpful restrictions that would impede crypto innovators’ ability to operate and push many out of the state.”

New York similarly requires crypto businesses to get a “BitLicense” in order to conduct digital-asset activities in the state and issued the first of these license in 2015. However, the practice has been heavily criticized by some crypto enthusiasts, including New York City Mayor Eric Adams, a Democrat who has ambitions of making New York a digital-asset hub.